Hello, and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli. You know, I have an interesting episode for you today. It’s about 45 minutes in length, great interview. I encourage you to stay to the very end. There are a couple of places in this interview that go a little deep and in, in complexity, but it’ll all come together for you. You know, my guest today, Emmanuel Daniel, interesting guy. He’s on the other side of the planet. As I was interviewing him, he was in Poland, but he’s got this fascinating book called The Great Transition, and it’s about the personalization of finance. He says it’s here and it’s accelerating. And in his book, he uses the story of the ice trade to describe how the world of finance transitions from a focus on digital platforms, which is what we have today to a, a level, a micro level, is what I call it, but a level of personalization that we’ve never seen before.
It’s happening, it’s been happening for years, and it’s accelerating. And all of this will have a profound effect on how institutions all around us, all institutions, markets, and societies will function in the the coming age, what he refers to as the network age, where we’re all connected digitally. And he introduces a term called the financialization of everything. And I ask him to break it down into a fair amount of detail and what that means and how it applies to all of us. It, it, it literally will touch and penetrate each and every one of us and everything we do. But I ask him to describe it, and he describes digitization that will transform all economies around the world. But at the same time, it’ll also enhance, you know, everybody’s receptivity, <laugh>, if that’s a real word, you know, towards all kinds of technologies, from cryptocurrencies and crypto assets to blockchain technology, to artificial intelligence, to just being able to control your own finances, meaning that it is controlled by your own person.
It’s decentralized. It’s not centralized around an institution like a bank or a lending institution or even the government for that matter. But these are trends that are happening now and will shape everything in society. So, you know, his book is a collection of all these original ideas, and he expands upon them. And it’s not a boring dry topic, it’s just happening all around you, and you just have to kind of be aware of it and open your eyes and see that it’s actually happening. So anyway, it’s, it was a great interview. I’m obviously recording this intro after the interview, which I just finished, so I hope you enjoy it. Take in as much as you can, and if at all possible, you know, just break your listen time into two and listen to this in two parts. But try to get through to the end, and I, I’m sure you’ll you’ll get a lot of value out of this. So that is it. Let’s move right into that interview. I hope you enjoy it.
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Well, it is my honor and pleasure to welcome Emmanuel Daniel to the show. He is a global thought leader in the future of finance, and I’ve been looking forward to this interview. He is definitely an entrepreneur and a writer, and he is listed as a top 10 global influencer in the FinTech Power 50 list in 2021. And in 2022, Emmanuel was trained as a lawyer. He has degrees from the National University of Singapore and the University of London. He travels widely and divides his time between Singapore, Beijing, and New York. And Emmanuel, welcome to the show.
Marco. Very happy and excited to be on your show. There’s so many different ways in which we can slice this, this conversation. Yeah. So take it away.
Yeah, definitely. Well, you travel a lot and you know, we were just talking for a few minutes before I started recording the interview here. You’re where again today?
I’m in Warsaw at Poland.
Warsaw, Poland
Yeah. And, and Beyonce is in, in town too, so we are competing for hotel rooms today. So it’s an interesting experience and you know, and I had to do this show, so let’s you know, let’s get on with it. I, I travel you know, both for pleasure as well as for gaining ideas for my next book. And, and there’s something about the empires and the civilization on this side of the world that I don’t know enough about. So that’s why I’m here. So, yeah.
Well, I’m sorry that you don’t have a room because Beyonce’s in town. That’s kind of funny, but I’m sure it’ll give you a room at some point.
I’m putting out all my cards, so <laugh>.
That’s hilarious. Well, it’s not funny, but it’s funny at the same time. Well, let’s, let’s start with you. Take a minute, just tell us a little bit more about yourself, and then let’s jump into your new book, The Great Transition. It’s, it’s a fascinating title, subtitle and topic. So I think it ties into a lot of things, not specifically real estate, but everybody listening to my show is interested in wealth and money and finance, and, you know, creating an understanding their world of money and personal finance. So I think it connects on many levels. But let’s start with you. Tell us a little bit more about yourself.
Well, I you know, I, I trained as a lawyer, decided not to be, and then spend 10 years working in consulting, stuff like that. And then I, I felt that, you know, I needed to break out and, and start something my own. And I like writing, you know, my first book just came out, but, but I built a career on writing, and the industry I chose was banking and financial services. And 28, 29 years ago, I set up an organization called the Asian Banker. It’s part publication, part research, part consulting. We have offices in Singapore, Beijing Dubai and then representatives in London, in New York. And I’ve just incorporated in Delaware. So the, the thing is that we, so I’m in the business of providing banks a perspective on how the industry is changing on them and helping benchmark what they need to do to plan their own future.
So, and the reason I started this business is because I call banking a cathedral industry. You know, whichever country you go into you, you need to have something to do with a bank or a banking industry. And, you know, banking is something that you know, covers someone’s life from, from cradle to grave next to government. It’s, it’s the big industry in every country. And and give me a perspective of, you know, how every different country is evolving. And the big story of my life is, has, has been to be, to have a front seat in the development of China in the last, you know, since 2000, you know, where I’ve seen how this country evolved from socialist perspective in banking and then became, you know, globally listed banks and you know, created globally listed banks, and now having to tweak the economy and all that.
Having a front seat view of China has been a real privilege, you know, because of the size of the economy and the impact it has on the, on the world. And the interesting thing is, as I was building this business, I then became friends with a number of good names in the us. You know, my book the Forward is written by Barney Frank, who wrote, who co-authored the Dot Frank Act. And like that I can do a few name dropping. And that’s because when you’re out from Asia, these big names, they enjoy coming into Asia, spending three weeks, and I have them with me for three weeks at a time. If I was in New York, I had to queue up and, you know, be stand in line to, to sort of have have time with them. So, so it’s an interesting, it’s been an interesting life that way.
And of course, being an entrepreneur, building a business selecting the right people to run different parts of the business all of that has to do with you know, how the wealth management industry has been evolving. And, and I have another platform called Wealth and Society where I’m not interested in wealth for its own sake. I’m, I’m interested when it’s part of being relevant to society. And I found that you know, in many of the countries that I go to especially if the GDP has been growing very strongly, the new wealth or the new wealthy, thinking a lot about they even feeling guilty, like, we are so wealthy, what do we do? You know, how do we give back to society? We come from countries that where our governments are dysfunctional, you know, so what should we do to support society and stuff like that. So I’ve been in the frontline of some of these stuff, and, and it’s been an exciting life. I enjoyed very much, and I enjoyed this conversation with you, Marco.
Yeah. Sounds like you have a, an interesting seat in theater and an interesting perspective on what’s going on around the world, which is fascinating. I’d love to pick your brain for hours about it. You made an interesting comment. You said that government, you know, it touches everybody. It’s tied into our lives, and that’s probably true in every single country. But you also made a comment that banks and the banking system touches virtually every one of us. And I never really thought about it that way, but the reality is, is that with the exception of, let’s say, the tens of millions or hundreds of millions of people in countries or continents like Africa, essentially, we refer to those as the unbankable, because you just can’t reach ’em. They just don’t have the tech. But it’s a true statement that the banks and banking system touches virtually everybody in first and second world countries.
And I never stopped to think about it that way. But, you know, with new technology coming along with crypto, crypto assets, blockchain technology that everybody from governments to banks is adopting, ultimately everybody is going to be bankable, and everybody will take control of their own personal finances. So I know you have a lot to say about that. Yeah, I’m sure. Well, let’s start with a various ba I like building blocks. Let’s start with the simple stuff. What do you mean? In your book, you talk about the personalization of finance, maybe this is where you wanna start. So what do you mean by that?
There’s a good point to start. So the title of my book is The Great Transition, the Personalization of Finances is Here and here I’m talking to bankers and telling them that because of new technologies, because of crypto, for example, the whole business of intermediation is crumbling. And banks and any intermediators you know, whether it’s banks or, or even exchanges, custodians, all these institutionalized players will have to redefine how they play the game. Now, in theory, technology is taking us to a to a ecosystem where you and I, Marco can, can, you know, transac with each other financially without having an intermediary anymore. And actually in Bitcoin, that’s exactly what you do. So it’s not like it’s tomorrow’s technology, it’s here today. It’s just not disintermediating the traditional players yet, because the traditional players hide behind regulation a lot. And also the, the way in which society holds together, it always looks for an intermediary to, you know, coagulate the function and to put, bring things together and, and then to also to capture the profit of the process.
So my book is about how the disintermediation of the financial services industry will evolve. And as that happens, several other things happen alongside. One is that the individual becomes empowered, meaning that you have all this information that used to be, you know, privy to the institutions, and, and today the individual has access to the same level of information. And, and actually the Reddit revolution a few years ago where GameStop and other companies where the institutional investors were trying to shop them, and, and retail investors pushed back with the same amount of information that the institutional investors had, they didn’t quite succeed. The technicality of it wasn’t what, you know, the optics of it looked like, but at the same time, there’s that promise that the end user is increasingly in charge of his transactions. So for your audience, for example, you know, the average wealth customer today is increasingly self-directed.
You know, he has control over the information, over his own assets. At the same time, the research that he requires, the you know, the market information that he requires, he, he’s getting as much of that from the internet as he is from his private banker. So his private banker is start starting to sweat his head up because like, okay, how do I continue to be relevant to my private banking client? You know, it’s almost like a charade because everything I say to my private banking client, you know, he already knows. Now, the thing is this, that the private banker’s response to this intermediation has been quite interesting when, if you remember this robo advisors, for example, you know, the private banker said, you know what, we now have going to put a lot more technology into serving you, Mr. Customer. And that’s because private banking, more than commercial banking and payments and anything in finance has got a high cost to income ratio.
It costs 90% to service. The cost to income ratio of private banking is 90%. Okay? And that small 10% of profit that a private bank makes gets wiped out every 10 years whenever it gets into trouble with regulators and, you know, have to pay a big fine and so on. So the private bank is constantly looking for ways to use technology to reduce his costs. And so what does he do? He, he puts out the RoboAdvisor. What the private banking client doesn’t realize is that the RoboAdvisor and now Chad, g p t on on research, the way that the technology is configured on the supply side is that whatever the question, the answer is my product. You know, so, so the, that’s how, that’s how the supply side thinks, but that’s not the intention of the technology. The intention of the technology is to empower the individual.
So what I’m saying in my book is that the private bankers and the commercial bankers have to start rethinking what financial product itself should look like in the network world that we are getting into. You know, right now we are in so much denial. There’s a lot of pushback on crypto and so on. But I think that the, the genie’s out of the box out of the, the, the container, right? So it’s, it’s out and, and it’s not going back into the box. Yeah. So, you know, it’s an asset class that we all have to start thinking about, but more than an asset class, new assets, new digital assets that have a utility function to them, okay? And that’s how we need to think about assets going forward. When we think of a house in the old days, we used to think about it as a mortgage that is 30 years at the end of which, because of inflation, it, you know, it’ll sit on inflation, and therefore it’s valued at something in the future.
The next generation is not going to think that way about assets. They’re gonna be thinking about the utility of assets, you know, and, and the utility of assets in the network world. So those are the things that I bring into this idea of the personalization of finance. The personalization of finance is not the way that the private banker is thinking about it, which is I’m providing even more personalized service to you. No, it’s the other way around. It’s that the individual is looking at his wealth, his control of his assets in a very personalized
Control of the assets and control the data as well.
And the data, right? So, so the big thing about data is that you think that chat, G P t or ai, the, the initial iteration of AI is, is a big deal. There’s going to be so much more data available that it’s going to bring us back to, you know, some of the experiments in finance that have not taken off for, for example, peer-to-peer lending, you know, platforms. Now, all the peer-to-peer pla lending platforms in the us, they’ve all turned into looking for a banking license. So they, they started off thinking that they were going to, to ace the banks, they were going to disrupt the banks and make banking history, and now all of them are looking for banking licenses. Why? Because they thought that the product in a peer-to-peer platform is yet another mortgage. But when you put a lot more data and insights into the profile of a person, whether it’s you or me or someone, a stranger that you’re lending to, there are a whole range of things that you can do with a lot more data.
You can lease a property to him, you can timeshare property to him. You can vary the properties treatment over a period of time that is over 30 year period, the first three years one form of treatment in the second, third years, second five years, second the third five years, and so on. So there are a whole range of things that we are going to be, we are already able to do today that will start taking a life of their own. And, you know, while we think of assets in a traditional way, because we today exist in the markets economy, in the network economy, assets are going to look very, very different. Now, just think about this, in a markets economy, when you sell me a house, you’ve gotta think about the best possible price that you can get rid of it at, and I have to think at the best possible price.
And then there’s a transaction, and that’s the end of transaction. But think about information. Information is an asset. When I give it to you, I don’t lose it, and you don’t lose it. And then when I give it to 10 people, I start to look different. So there are rules about the network world that are very different from the markets world that we are familiar with, where we are accustomed to today, you know, and so that’s the transition that I’m, I’m describing in the book. I have a picture of a ice cube on the front of the book. That’s to make it deceptively easy for the layperson to understand where I’m going with this. You know, in the old days, we used to, we used to saw ice out of the lakes and, and put it on horse drawn carriages, take it to the city. Where do we get our eyes today? It’s in a refrigerator that we own you know, and it’s well within our control. So that’s the transition that finance is going through.
Wow. So just to take a half step backwards to connect some dots for my audience, and then we’ll take a step forward, talk about, you know, the personalization of finance. Here’s kind of what goes through my mind. If you think back decades ago, there was a time when if you wanted to buy or or sell stock, you had to call your stock broker. This was before the time of the internet, you know, you didn’t have access to information, or at least not instant access to information. You had a newspaper that came out every day, and you had financial reports that came out, who knows how often. But that changed. Now, you know, the stock broker seems to be like irrelevant. And then you look at real estate, real estate has, you know, been disrupted as well. Now you have websites like Zillow where you can look up any listing and information in great depth about any property, anywhere at any time, even if it’s not for sale.
And it gives the individual access to information instantly and gives you power, put power back in, you know, the hands of the individual. It’s not that you need to go to an institution like a bank or whatnot, in order to have permission, almost to have access to funds or to move funds. So the direction it seems that we’re going today is that banking and technology, anything related to finance has, is becoming decentralized slowly. And then quickly. It used to be that it was all centralized, meaning that you had to go to a bank or a lending institution or a mortgage company because it was controlled by one large nebulous financial institution. And you needed to go there to sign papers, to get approvals, get permission, whatever it is. But today, you can essentially send anybody anywhere in the world money or funds or currency instantly, like within seconds. And so there’s this complete decentralization of finance, and we’re not there yet, but this is obviously the trend that’s happening, and it’s accelerating. So when you talk about personalization of finance, I assume you’re talking about that, and then maybe even more than that, but at least that
You, you’ve brought up a very interesting point. What happens when assets get digitized? We’ve already seen the first iteration of that, and that was in the story of Silicon Valley Bank, signature Bank First Republic, because the deposit business is properly and fully digitized, that, you know, just on the whim of perception that that is thrown into a, a Twitter feed. Billions of dollars can get moved out of a bank’s balance sheet, and it causes a hole in the balance sheet. You know, they’re not able to match their assets and their liabilities. Now, think what will happen to property when you put a lot more data onto it, when, from the time of signing a property deal to the time of getting your mortgage papers in your hand, or the deed in your hand used to be three months, and then two weeks, and then maybe tomorrow.
You know, it depends on how automated your mortgage registry is in your different countries, right? How much more liquid a mortgage will start to look when that whole transaction can be completed in seconds. It’ll change behavior. It’ll change how people view mortgages, you know, just in the way they view their favorite car. You know, their automobile automobiles used to be something that you buy for the whole family, you know, for 20 years. And today, you change it every year because there is always a new model coming out. And it’s the technology that’s applied on both sides of the equation. In the case of automobile, it’s the whole manufacturing that’s changed. The, the whole manufacturing industry that is able to turn out new MO models. There’s not a manufacturer who has anything less than 30 different models in any one factory structure, you know, so mortgages are going to start looking that way, and that, you know, somebody will flip a, a mortgage and mortgage becomes a fashionable asset rather than a investible asset in the same way that deposits today have transitioned, and this is something that bankers haven’t woken up to.
There used to be a time that people used to put money in a bank account in order to earn that meager, you know, 1% interest rate, you know, and then it fell to below 1%. It’s so pathetic that, you know, just driving to the ATM will wipe out your profit. That’s how you know this functional it’s become to digital wallets, which today growing in size and the proposition of the digital wallet and the issue of a digital wallet can be anything from a bank to one of your super apps and a metaverse. And the proposition of a digital wallet is its utility that you can use it to pay each other instantly and get on with your life. It feeds your lifestyle. And when you see where from bank accounts to digital wallets, where that’s going, crypto is definitely the direction or something digital digital to token. Now, I said something digital because there are a number of options running around at the moment. There’s stable coins, there are cryptocurrencies, and there are governments you know, promising to start something called a central bank digital currency, which is a state-owned, you know, cryptocurrency. Now, which ones of these will be a winner, will be based on utility functionality that is a token or an asset that can help plug in the user to his ecosystem. And his ecosystem is increasingly both physical and digital. So that’s the transition that we are making today.
I remember about five or six years ago, I was sitting on a small shuttle bus with one of my current business partners in a venture today. He wasn’t back then. And we were having a conversation about, I remember saying that the day will come when anything related to title on property, title to the property, title on insurance, everything, all of that information will ultimately live on a blockchain and be accessible to the public and be verifiable, you know, irrefutable, transferable. I think it’s already happening. I, I can’t say definitively, but you know, anything that you can digitize, especially when it comes to real estate, and us as real estate investors, will find itself in the crypto verse. <Laugh>
You just took that sentence out of my, I mean, like, I can com finish the sentence for you. Anything that you can digitize, you can financialize. Okay. So I say that in my book, I’m, you know, you are saying the same thing in your own words, which, which is very interesting. And if an asset, if a digital, if an asset like a mortgage can be put on a blockchain, can be transacted instantly, it can be financialized. You can offer it as a security to 10 different people, and they can hold it for you. You do not need to have all that money upfront. You do not need to sign up to a mortgage. You, you can get investors to help you with that, a lot of stuff. So anything that can be digitized can be financial.
So is that what you mean when you say financialization of everything? Is that essentially what you’re talking about?
So from there, take it to financialization of everything. So what’s happening right now in the global economy is this, you know, the US GDP is like 21 trillion at the moment. In 2013, the Bureau for Economic Analysis in Washington redefined the idea of gdp, d p. So GDP D is no longer just manufacturing, you know, real work employment and services related to hard goods and services. They started to add entertainment, software, intellectual property, and franchises, a whole range of intangible assets. And they’re, and they’re going to continue adding to it. So I’m saying that, and I’ve, a few people are saying this, that it’s not inconceivable that the US GDP can go up to 45 trillion in the next 20 years. And a lot of that is actually highly financialized assets. And that you and I need to think of assets in that way, that our wealth will come from PHE products, not hard assets anymore.
Speaker 2 ([spp-timestamp time=”25:36″]):
Yeah. Well, I think it’s been going in that direction for decades because we’re, you know, they refer to us as the information economy, or at least at some point they refer to the US economy as the, I believe it was called the information economy or something like that. So with more and more information and data coming out there and being able to financialize or monetize that information, of course it only makes sense that we start to include that in gdp because that is part of our gdp. D
That’s correct. And no, and, and they’ve used, there are several books that have come out, the Information Economy, the Experience Economy, and, and the latest I’ve, I I’ve came across is the, the metaverse economy, which is the metaverse itself is an economy. And already you have people in the NFT space buying intangible assets and, and millions of dollars. So it’s not so much whether they are they’re wasting their time or whether what they’re doing is for real or not. It’s a fact that there are people who are putting their money down to intangible assets today. It’s already happening, and it’ll create an economy of all of its own. And in that economy, the real value is the value of being networked with anyone and everyone that you want to be. It’s not just an asset that sits on a property somewhere cold and dark or in your backyard.
We really need to start thinking differently about what an asset is going forward. And actually, the people who can help us are the next generation. So if you look at what Generation X, gen X and beyond thinking about, or what they value to be important, many of them now don’t value a car as being important. We are past that now because it’s possible to get a car when you want it, you know, to ride hailing. But more than that, if you, in, in Xen, for example, in China, they actually have taxi services using autonomous vehicles. Mm-Hmm. <Affirmative> self-drive vehicles, which, you know, in other words, there is no driver coming up to pick you up. And what that means is that you stop worrying about car, right? You know, and you stop worrying about a car that sits in the garage. You start thinking more about experience and so on.
So that’s the dimension about assets, the experience economy that people traditionally don’t think about. There are two other aspects. One is time that we used to think of assets as something that sits with us over a 20 or a 30 year period. An asset is still an asset if it sits with us for two years or two minutes. And it becomes more possible for that to happen because it’s digital, you can use it and it’s liquid. And the other element is the value system of the society that we live in. The value system is definitely changing. The baby boomers valued assets that set somewhere that’s, that they can go back and look at it for 30 years. And then the next generation started putting in emotional values like sustainability and so on. And the following, the generation after that is really entertainment and utility and network, whatever assets enables them to network with others who share their values and stuff like that. So we think of these as ephemeral ideas, but they are actually shaping what society values as asset and how that changes over time.
Yeah. You’ve got me thinking about a million things right now. I could probably ask you 500 different questions based on what you just said. I won’t do that to you of course. But maybe just another three or five questions that are tied to what you were just talking about. I want to touch on China real quick and leading economies, but before I do that, you made a comment that, you know, we have a US G D P of about 21 trillion, and that could grow to 45 trillion. If we redefine what G D P is, we start including all these technology and information that could be financialized, if that’s a real word. You made a comment at some point that you said debt becomes the economy. And I don’t understand what you mean by that. Like, if our GDP is growing and, you know, we continue to quote unquote print money to feed our economic machine because we do have a debt-based economic system, what is it that you mean when you say debt becomes the economy? I mean, is it really just one and the same thing that we have a debt-based economic system?
Yeah. We, we have a debt-based eco economic system. Ci money is debt, right? And it’s perpetual debt and is indeterminate debt, right? Meaning that the state has the right to print as much money as it wants. The only reason it doesn’t do that is because it also has a consequence of on inflation and exchange rates. So they have to balance the three elements, the, the price of money mm-hmm. <Affirmative> the inflation and exchange rate. So the thing is that the US economy in 2021, the GDP 21 trillion, the total debt of the state is now 31 trillion. Okay? So the ability to meet its debt obligations is now AOT point, you know, for the US economy. So now the thing is this, where is this going? And there’s so much discussion on, oh, we will not be able to pay off our debt, and so on.
And that discussion is quite unnecessary because the no nation state has ever had to pay off its debt. It’s always had the privilege of issuing more and more debt. Now, when you digitize debt, then the focus changes to how can we distribute this debt and how can we attract investors to continue to be interested in this debt, and then we can continue creating as much debt as possible. And because it’s a digitized economy, investors are constantly looking for new sources of income, and that becomes the economy. So this concern that some economists have this concern that, you know, balancing the budget is a important priority of the treasury, right? And so on, you know, but I think that we are way past that. It’s not just the us you know, China also has the similar problem, and I think China will learn from the US on how to internationalize its debt.
And Japan is perhaps the best example now after 30 years of creating so much debt that it’s now created a domestic consumption system that can actually absorb its own debt. Meaning that the biggest investors in Japanese debt is Japanese people themselves. It’s not even being sold outside of Japan. And that is actually a sustainable economy. So there are models out there that demonstrate that debt driven economy is not the problem, you know? And the problem is somewhere else. It’s in creating productivity, it’s creating value, it’s creating assets that people value and, and stuff like that. Yeah. So, but where I was coming from in my thesis is that, that firstly, anything that can be digitalized can be financialized. And, and then if, if, if anything can be digitalized, then financialization, you can financialize anything, you know, and if you can financialize anything, you know, and if you can financialize debt, which we do today, if you can digitize debt, then debt becomes the economy. So we are, we are talking about, we are actually coming to terms with what it’s always been, except in a digital form. That’s actually what we are coming to terms with as a global economy.
I feel like I’m living in the matrix <laugh>, when when you hear about this stuff, you know, it’s just, it’s complicated, but it’s not. And just to see how far the tentacles reach out and how everything connects with debt and, you know, currencies and crypto and artificial intelligence and everything else, it’s just mind boggling.
I mean, I’m gonna throw in a sentence here, which, which I, I hope that your reader, your viewers will remember that I said this. I foresee a day when every bank will compete with each other, not on a deposits business, but on issuing stable coins that issuing their own stable coins, each bank issuing its own stable coin. Now, I want you to remember that I said this because I’m saying several things related to that. I’m saying that the, the value of money is going to move shift from its ability to create value, to become, to its ability to create utility. And stable coins are all about utility in the digital space. You know, I just wanna throw that in, but please keep going. You were going to ask me your next
Question. That’s a very interesting thought or theory. It’d be interesting to see if that’s ultimately what happens, because I would much, much prefer that than to have central banks around the world issue their own central bank digital currency, because that is sounds so draconian. It sounds scary to me because the fact that a central bank has the ability to flip a switch anytime they want and cut you off from your own money, from your own currency, is a very scary thought. I mean, that is socialism, communism at the extreme level. I mean, if they control your finances, they’ve got full control over you.
Yeah. And that’s not happening. I’ve spoken to the bank, the central bankers themselves, the, the governors of the central banks or the countries that have issued central bank digital currencies. It’s not working. Okay? So short answer, it’s not working. And it’s for me it’s a sense of curiosity that central banks even talk about this as if it’s a serious thing. You know, they have something called the Bank for International Settlements. They meet together and they, they exchange notes, and, and they, they, they, you know, they, it is a love fest, right? And they like feeding each other, you know, ideas. And they are nonpartisan at all. Like the, the Chinese are just as able to influence the American regulator and influence the Canadian and the, and the small countries like ca, New Zealand and so on. It’s a curious ecosystem. The central banks, central bankers. And for Janet Yellen to issue a white paper on central Bank digital currencies in the us, she must be out of touch with the people of the United States. What’s wrong with you? Very much? You know, nobody’s ever going, nobody’s ever going to give you this, right? But she issues the paper as if it’s as if financial architecture in the US is built by policy. It never was. So just take my word for it. It’s not happening.
Well, that, that’s refreshing to hear. I’m, I’m very happy to hear that, cuz that was really a scary thing for me to think about. Well, let’s wrap up with one or two quick questions here. Since we’re on this track of, you know, the economy and central banks and whatnot, what country do you think in the future will become the next leading economy? I mean, we have been for the longest time and you know, China and India to some degree are strong contenders. Japan has been a strong contender. Do you think there’s gonna be a shift or a change to another country as the leading economy?
You know, all the work that I’ve done in finance led me to one very important conclusion. And that is that the purveyor of the future of the global economy is information. Even finance is information. The, the ability for me to pay you money is the same as the ability for me to send you a text message. So if I can send you a text message for free, why can’t I pay you money for free? Because money And, and it was an American banker la it was Citibank Walter <inaudible> who said at the end of the day, money is information. Okay? And that’s what we are transacting between each other. Now, based on that, in my perspective, in my worldview, the single most important asset that is driving the global economy is information. How we deal with information, how we build knowledge with it, and make it into an asset class in itself.
And the country that does it best of all is the United States. And any country that wants to ace the United States on on the G D P or economy has to have a superior ecosystem of dealing with information. And any country that says that we are going to ace ai, for example, but then says, we will not allow you to discuss anything about Tibet, Taiwan, or the Sji problem, you are editing yourself. And when you edit yourself, you’re not able to ace the game. You’re, you’re not able to make breakthroughs in the information game. And I say this, not because I am for against any country. In fact, I absolutely love China for everything that it’s achieved in the last 30 years, you know, as a real economy and the sense of responsibility it has to its own citizens. All that is pretty good. It’s very, very good, you know, and, and a lot of developing countries can learn from what China has achieved in the last 30 years.
But we go back to first principles. You can’t have your cake and eat it. You can’t say, I want to control information and, and still ace it. You know, now the US I call the, is the first child of the information age, the firstborn child of the information era. And therefore it is, it then becomes a victim of all the malice that we have to deal with in the information era before we, we create the next layer of structures that we need. So social structures that we need to hold it together. So it’s not a surprise to me that, that the US goes through so much dysfunction. And the nice thing about the US in my view, is that it’s always been dysfunctional. So when something dysfunctional happens, I say, what’s new? That’s been the case for the last 250 years. It’s more you know, it’s, it’s never moved from a white paper to the next white paper or from a you know, a national economic policy to the next act, national economic policy.
It’s sort of you know, huddles along and then it creates the next frontier. Now the, the, the thing about the rest of us is that we get to pick and choose what about the US economy that we would like to emulate. You know, so we like creativity. So we take that and say we like our societies to be a bit more creative. Mm-Hmm. <affirmative>, we like hard technology chip manufacturing. So we need to put in capital to, to ace that you know, we pick and choose and, and then we curate our own societies to be stable enough for their own sake. So when the rest of the world looks at the US and see how dysfunctional it is, it’s the breakthrough. It’s the frontier of new ideas and new innovations. Now, of course, we’ve now reached a point where many countries have a high level of of structure and sometimes structure is also what you need in order to get to the next level.
And here it’s always a question. Like it’s always a, you know, the US is always at the brink of disaster, you know, and then it pulls back. So as long as that rhythm is still just a rhythm, I think that it will just continue as it is. But if there are new factors that are game changers, in other words, a a, a country that is more organized can ace a new technology, because being organized is an important element of of, of taking it to the next level, right? Like building tanks, for example. And here in Poland, the reason the Prussians became the German empire eventually was simply because they were organized and, and it required military level organizations and in order to create the manufacturing capability that they, that they did. So if that’s sort of game changing organizational structure that’s required then it’ll be a change. But right now information is a huge and unwieldy beast that only the US has been handling totally dysfunctionally, but every time making breakthroughs and the rest of us enjoy.
Yeah, interesting. It’ll be fascinating to see where we go. And just related to that, and we can wrap it up, is do you think the US will lose the global reserve currency status to a country like China or anybody else? I mean, is that a possibility?
Short answer is not yet. The other countries are very determined to find an alternative to the dollar. And that’s because the US has militarized it’s the dollar. It is, it is correct. It has weaponized the dollar. Yeah. And the, the way in which the dollar became the global reserve currency is has nothing to do with US policy. It wasn’t created in the Congress. It, it wasn’t created in Senate. It wasn’t created by the treasury or the, or the Federal Reserve Bank. It was created, you know, as a consequence of a series of accidents that just built on each other worldwide. But after it became the global currency, I think that the US then started to weaponize it by using the dollar as a mechanism to create behavior that is consumer it to what it wants to achieve. So like right now in New York, I have friends in foreign banks whose greatest fear is to get another, you know, a petition from the New York Department of Finance because of a violation.
And sometimes the violations are subjective because like, you know, standard Chartered Bank, for example, was fined $300 million because it routed a few Iranian transactions to the dollar, which gets settled in, in the us. And actually, it, it happened during a time when the Europeans had opened up trade with, with Iran and the US had a different, you know, suns at that point in time. So it was a gray area at that time. Now, so any number of countries, China, Saudi Arabia Brazil would welcome the opportunity to see another currency. But the operating principles of a currency that is global is that firstly, a lot more of the currency has to exist outside the economy. The US dollar, 70% of that is, you know, circulates outside the US and the government shouldn’t have any desire to control it. You know, whether in capital account or in trading by investors who want to short the, the currency and so on.
And the US dollar is big enough that no one in the world can short it. So now no other country has come to the point of saying, you know what, we will liberalize our, our currency and we will float our currency and we will make it available outside of our economy. And for China specifically, it has to get past that phase in order for it to even desire for the country, for the currency to be a global currency. Right? You know, and the funny thing about global currency is this, what is the global currency? It means that every other country in the world holds your, your currency. And when they hold your currency, what are they doing? They’re saying that you will work for your currency and that your currency will hold its value for a long time. So conceptually, it’s the US working for the rest of the world. Okay. And why is it that becoming a reserve currency is such a matter of prestige for other countries? Logically it doesn’t make sense. Okay, so these are some of the points that I have on that point.
Fascinating stuff. Emmanuel, you’re a guy I could talk to for literally hours and hours, but your book The Great Transition. I do recommend our listeners pick it up and read it. You know, it’s a book about, I think it describes how the world finance will transition from a focus on digital platforms and centralization to a level of personalization and decentralization and how that’s accelerating in the years to come. Is that a fair assessment?
Absolutely. Marco, thank you very much for for having digested all those points and given me the chance to describe some of the things that I did. And I just wanna say here that because I come from within the industry, a lot of the descriptions that I make and the projections that I make are based on first principles from where the industry is today. And that’s why sometimes I end up talking like a banker rather than a futurist, because I, I need to convince these guys that I’m talking about the, the industry that you’re familiar with.
No, it’s, it was great. Emmanuel, tell our listeners how they can follow you, find you get more information, find your book.
Marco, emmanueldaniel.com. That’s my block page. And then from there, everything else, you know, the business that I run, and also from time to time, I put in notes to carry some of these ideas, these conversations that we’re having right now.
Well, we’ll put that all in the show notes and on our website so people can easily find it. And of course, your book is available everywhere, including Amazon, you know, the usual places. So Emmanuel, thank you very much for coming on today. Appreciate your time. This has been very eye opening. Thanks, Emmanuel. Thank you.
Well, I hope you enjoyed my interview with Emmanuel today. Fascinating guy, interesting book. And I’m, I’m telling you, I could’ve probably talked to him for hours and asked him all kinds of questions. I was just going down all kinds of rabbit holes with him, <laugh>, it was fascinating. But that is it for today. Hope you enjoyed today’s episode. Download your free report of The Ultimate Guide to Passive Real Estate Investing available on our website at noradarealestate.com. Just look for that on our website or in the show notes here.
Get your free strategy session with my team of investment counselors. If you’re interested in investing in real estate or you’re thinking about it, or you just wanna expand your portfolio, or maybe you just have some basic questions and you just want to know, is this right for me? If you have a question about real estate investing or finance, or just investing in general, or maybe even a personal question for me, shoot that over to me. I’m happy to answer that on the next Ask Marco episode. And of course, I say this all the time. If you haven’t subscribed, remember to subscribe. It takes you just a few seconds to click that button and become a subscriber to the show.
And that is it for today. Thank you for listening, and we will see you all on our next episode.
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